What’s in the New Coronavirus Stimulus Package for Production Companies?

Production companies hit hard by the COVID-19 pandemic and its various phases of shutdown and restarting have been eager to see the additional relief promised by the new coronavirus stimulus package. The Consolidated Appropriations Act of 2021 lays out spending for the next year and contains multiple modifications to existing laws including the CARES Act and expiring tax provisions, along with several new programs.

Film, TV and new media production companies care most about the Paycheck Protection Program (PPP), the Employee Retention Credit (ERC) and the Families First Coronavirus Response Act (FFCRA). We give you the bullet points on how those were impacted by the new legislation, as well as the new $15 billion in grants specifically for shuttered entertainment venues and related businesses.

Paycheck Protection Program (PPP) Loan Updates for Production

With a specific focus on aiding small businesses like independent production companies impacted by the pandemic, the agreement sets aside $285 billion for additional loans under the PPP created under the CARES Act. Among other measures, the new legislation sets aside $12 billion specifically for minority-owned businesses. Further focusing on small businesses, publicly traded companies such as the studios will be ineligible to apply this time around.

• Creates a second round of PPP loans for eligible businesses.
• Defines eligibility for the PPP second draw as small businesses that have no more than 300 employees AND demonstrate at least a 25% reduction in gross revenues between comparable quarters in 2019 and 2020.
• Establishes a maximum loan size of 2.5X average monthly payroll costs, up to $2 million.
• Borrowers receive full loan forgiveness if they spend at least 60% of their PPP second draw loan on payroll costs over a time period of their choosing between 8 weeks and 24 weeks.
• Expands PPP allowable and forgivable expenses to include supplier costs on existing contracts and purchase orders, costs relating to worker protective equipment and adaptive costs, and technology operations expenditures.
• Allows PPP borrowers to include additional group insurance payments when calculating their PPP payroll costs. This would cover insurance plans such as vision, dental, disability, and life insurance.
• Allows borrowers who returned all or part of their PPP loan to reapply for the maximum amount applicable.

Extension of Employee Retention Tax Credit (ERC)

The ERC encourages independent production companies, content creators and other small businesses to keep employees on their payroll by offering a tax credit against certain employment taxes the production company normally pays. The bill offers improved conditions and extends these credits until June 30, 2021.

• Increases the credit rate from 50% to 70% of qualified wages to your production crew and staff.
• Expands eligibility for the credit by reducing the required year-over-year gross receipts decline from 50% to 20% and provides a safe harbor allowing employers to use prior quarter gross receipts to determine eligibility.
• Increases the limit on per-employee creditable wages from $10,000 for the year to $10,000 for each quarter.
• Increases the 100-employee definition for determining the relevant qualified wage base to employers with 500 or fewer employees.
  • Employers with over 500 employees can claim the credit only for employees who are paid not to work
• Retroactive to the effective date of the CARES Act, the provision:
  • Clarifies that group health plan expenses can be considered qualified wages even when no other wages are paid to the employee, consistent with IRS guidance; and
  • Provides that employers who receive PPP loans may still qualify for the ERC with respect to wages that are not paid for with forgiven PPP proceeds – thus allows for businesses to claim BOTH the ERC and PPP, just not on the same wages.

Grants for Shuttered Entertainment Venue Operators

The bill also provides $15 billion to support a broad category of entertainment-related businesses that have been shuttered for most of the year – including small theaters, live venue operators or promoters, theatrical producers, live performing arts organization operators, motion picture theatre operators, and talent representatives – who demonstrate a 25% reduction in revenues.

Such grants shall be used for specified expenses such as payroll costs, rent, utilities, and personal protective equipment.

FFCRA: Paid Sick and Family Leave Mandate Ends, but Production Employer Credits Extended

The latest stimulus bill does not extend the sick or family leave mandates, ending December 31. However, as written, the bill does continue a refundable tax credit to subsidize the cost to businesses if they provide paid leave.

That means come January 1, 2021, production company employers will no longer be required to offer two weeks of paid leave to workers who become sick with COVID-19, or up to 12 weeks of family leave to people who cannot work due to child-care needs… but the federal government will continue the payroll tax credit through and until March 31, 2021.

Keep in mind there are state and local mandates, in addition to collective bargaining agreements, which may extend beyond the FFCRA.

Download the full appropriations bill here.

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